- A former FDIC chair says there's "no doubt" more banks will fail after Silicon Valley Bank's collapse.
- William Isaac said the collapse of SVB seemed "a lot like the 1980s" banking crisis, per Politico.
A former top banking regulator says Silicon Valley Bank's collapse on Friday will undoubtedly cause more banks to fail.
"There's no doubt in my mind: There's going to be more. How many more? I don't know," William Isaac, the former chairman of the Federal Deposit Insurance Corporation, told Politico on Sunday.
"Seems to me to be a lot like the 1980s," Isaac added, per the outlet.
In an email to Insider, Isaac warned that economic conditions at the start of the 1980s banking crisis were similar to today's, with "terrible government fiscal and monetary policies for most of the past two decades" and "inflation out of control."
He compared Silicon Valley Bank's collapse to the 1980 failure of First Pennsylvania Bank."First Pennsylvania Bank, the largest in Pennsylvania and the oldest national bank in the country, decided to invest heavily in fixed-rate Treasury bills and got caught in an interest-rate squeeze when the Fed began raising interest rates strongly to combat inflation," wrote Isaac. "Sound familiar, SVB?"
"It was the beginning of a long and deep financial crisis that lasted until 1992. Hopefully, this one will not last nearly so long," Isaac added.
Isaac was the chairman of the FDIC from August 1981 to October 1985. During Isaac's tenure, he had to manage the fallout of the 1980s banking crisis.
More than 1,600 banks insured by the FDIC collapsed or had to be bailed out between 1980 and 1994, per the agency. Around 3,000 banks and thrifts failed during the 1980s banking crisis, per the Securities and Exchange Commission.
The California-based Silicon Valley Bank was taken over by regulators on Friday after it failed to raise capital and its depositors triggered a bank run.
But other banking industry observers say Silicon Valley Bank's implosion doesn't mean other banks are at risk too.
Former Treasury Secretary Lawrence Summers told Bloomberg on Saturday that he doubts the collapse will lead to a "broadly systemic problem."
"I don't see, if this is handled reasonably, and I have every reason to think it will be, that this will be a source of systemic risk," he told Bloomberg.
Goldman Sachs analysts also advised investors to buy dipping banking shares amid Silicon Valley Bank's collapse, saying that the risk of Silicon Valley Bank's failure spreading to larger banks is "remote."
Meanwhile, Treasury Secretary Janet Yellen on Sunday told CBS' "Face the Nation" that the "American banking system is really safe and well-capitalized, it's resilient."
"In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and was tested during the early days of the pandemic," Yellen said.
The FDIC, US Treasury, and the Federal Reserve Board said on Sunday that they will bail out Silicon Valley Bank's customers "in a manner that fully protects all depositors."
The FDIC's press department declined to comment on Isaac's remarks when reached by Insider.
February 14, 2023: This story was updated to reflect comment from William Isaac.